What is bitcoin?
Bitcoin is an electronic payment system that operates through a peer-to-peer network (P2P). This means that the network users can transfer funds directly to each other, without an intermediary, such as a bank or some regulatory bodies. In this case, the funds are bitcoins (BTC), a cryptocurrency under the same name.
In fact, bitcoin is a code; it exists only in a digital form and is stored in digital data storages. Bitcoins can be mined individually or bought from other BTC holders. The coins can be stored in special electronic wallets. The Bitcoin network users are anonymous, and they do not have to verify their identities, as in electronic payment systems, such as Visa, MasterCard, American Express, etc.
Centralized Network vs. Peer-to-Peer Decentralized Network
All resources for bitcoin emission and maintenance of the system are dispersed among the network participants. Blockchain is not stored on one individual server, but is multiply copied and stored by all network members so no data manipulation is possible. All operations are conducted directly between users, without intermediaries.
Transaction speed in the Bitcoin network does not depend on how many bitcoins are being transferred or on the distance between users. Residents of different countries can transfer bitcoins to each other as quickly as if they can to their neighbors.
All data exchanged by members of the Bitcoin network is encrypted and cannot be decrypted without a user's private key.
Each approved transaction is recorded into blockchain. All network users can see how many BTC are transferred, although nobody can know the identity of a sender and a recipient.
Irreversibility and immutability
Confirmed transactions between Bitcoin users are irreversible, unlike transactions in traditional, centralized electronic payment systems. Moreover, all operations on blockchain are subject to a so-called consensus mechanism, allowing the network participants to reach agreement. In order to record any new data into blockchain the consensus between the vast majority of the network must be reached. This excludes the possibility of a fraud and data manipulation and makes transactions immutable.
Decentralization and no need in a trusted third party lead to independence.
Anyone who has access to a computer or a mobile device with the Internet connection can join the Bitcoin network. The network unites users from all over the world and enables them to conduct transactions quickly, transparently, censorship resistantly and without having to pay financial intermediaries for their services.